August 31, 2007

August 29, 2007

The Census Bureau reports (press release, report) an increase in median household income, but in TimesWorld the glass is never half-full - sine they also reported a decrease in the median income of full time workers, that has become the defining statistic. Let's cut to the Times story:

The nation’s median household income grew modestly in 2006, the Census Bureau reported yesterday, even as the percentage of people without health insurance hit a high.

Experts said the rise in income was mainly a reflection of an
increase in the number of family members entering the workplace or
working longer hours. Average wages for men and women actually declined
for the third consecutive year.

“There’s lots of evidence that more people are working,” said Jared
Bernstein, a senior economist at the Economic Policy Institute, a
liberal policy group in Washington. “The important theme going on here
is a labor market that’s definitely offering people more work and more
hours, but at lower wages.”

Geez, employers would prefer to see people work longer hours at less pay - who knew? Pressing on, here is a bit of their editorial, with emphasis added:

The fortunes of middle-class, working Americans also appear less
upbeat on closer consideration of the data. Indeed, earnings of men and
women working full time actually fell more than 1 percent last year.

This
suggests that when household incomes rose, it was because more members
of the household went to work, not because anybody got a bigger
paycheck. The median income of working-age households, those headed by
somebody younger than 65, remained more than 2 percent lower than in
2001, the year of the recession.

Do these data really suggest that people worked longer hours but did not get raises? A suggestive bit of evidence for an alternative hypothesis is included in the tidbit that the median worker actually earned more during the recession in 2001.

From the chart (p. 44 of the .pdf) we see that in 2001 58.7 million full time male workers had a median income of $43,589. By 2005, 61.5 million workers had a median of $42,743; by 2006, 63.1 million workers had a median income of $42,261.

This is interesting - as the number of workers has gone up, the median income has fallen. One might hypothesize that more people are working for less and conclude (as does the Times) that people were not getting a "bigger paycheck".

However, one might just as reasonably conclude that, hmm, only the strong survive. When a recession starts the least experienced (or more specifically, the least productive) workers will be sacked. For the statistics entering a recession one might see total full-time employment fall even as the incomes of those with jobs actually rises. This happened in 1990-91.

And the opposite could be true during a recovery. Presumably, a lot of hiring is done at the entry level, so a big increase in employment could be plausibly associated with a drop in the median wage.

Just looking at the history of the median real income of a full time male worker, I see that it peaked in 1978 during the halcyon Jimmy Peanut era (I sense a long-term problem with the inflation-adjustment stats). Other intermediate peaks in median income occurred in 1986 and 1992, during the recession that got Clinton elected. In fact, the level reached in 1992 was only re-gained in 1998, six years into the Clinton boom. And to be fair to those waxing nostalgic for Bill (and Hillary!), from 1995 to 1999 both the median income and the number of males with full time jobs rose, so it is certainly possible to see both go up. And it was no doubt a welcome relief to many, since the four years from 1993-96 were years of rising total full time male employment but falling median income for that group. By cross-checking the chart for median household income I see that that figure was mostly rising in that same period, as now.

Again, still staring at the same full-time worker table I see that full time male employment hit a peak in 2000, although median income fell slightly from 1999 (fair enough, since a recession had begun); median income actually rose after total employment had fallen, with an income peak of $44,583 set in 2003. Full-time male employment bottomed out two years earlier, in 2001 and was essentially flat for two years.

I think there is less in these stats than meets the eye of the TimesMen, although perhaps enough to meet their needs.

August 26, 2007

The always fascinating Michael Lewis (Liar Poker and more) goes back to his Wall Street for an article on catastrophe bonds - bonds linked to earthquakes, hurricanes and the like - as part of the financial markets evolution in response to Katrina.

However... in the course of neatly illustrating a point about pricing two independent events, Mr. Lewis and the star of his article, Mr. Seo (a hedge fund manager in Westport, CT) provide an example which is over-simplified to the point of glaring inaccuracy. I have no doubt Mr. Seo spotted the error immediately; I suspect that Mr. Lewis was also aware of the problem, but pressed on in pursuit of a broader point.

But we don't press on in pursuit of broader points around here - if "No nit left behind!" is not already the unofficial site motto, it will be soon. So let's discuss on Sunday what Mr. Seo's clients will be ribbing him about on Monday:

The logic is what Seo stumbled upon back in 2000 at Lehman Brothers
after someone handed him a weird option to price. An industrial company
had called Lehman with a problem. It operated factories in Japan and
California, both near fault lines. It could handle one of the two being
shut down by an earthquake, but not both at the same time. Could Lehman
Brothers quote a price for an option that would pay the company $10
million if both Japan and California suffered earthquakes in the same
year? Lehman turned to its employee with a reputation for being able to
price anything. And Seo thought it over. The earthquakes that the
industrial company was worried about were not all that improbable:
roughly once-a-decade events. A sloppy solution would be simply to call
an insurance company and buy $10 million in coverage for the Japanese
quake and then another $10 million in coverage for the California
quake; the going rate was $2 million for each policy. “If I had been
lazy, I could have just quoted $4 million for the premium,” he says.
“It would have been obnoxious to do so, but traders have been known to
do it.” If either quake happened, but not both, he would have a
windfall gain of $10 million. (One of his policies would pay him $10
million, but he would not be required to pay anything to the
quake-fearing corporation, since it would get paid only if both
earthquakes occurred.)

But there was a better solution. He
needed to buy the California quake insurance for $2 million, its market
price, but only if the Japanese quake happened in the same year. All
Seo had to do, then, was buy enough Japanese quake insurance so that if
the Japanese quake occurred, he could afford to pay the insurance
company for his $10 million California insurance policy: $2 million. In
other words, he didn’t need $10 million of Japanese quake insurance; he
needed only $2 million. The cost of that was a mere $400,000. For that
sum, he could insure the manufacturing company against its strange risk
at little risk to himself. Anything he charged above $400,000 was pure
profit for Lehman Brothers.

Hmm. So Lehman pays $400,000 for a policy that will pay off $2 million if an earthquake hits Japan. If there is such an earthquake, they will then take the $2 million and buy $10 million of coverage for California. If no earthquake hits California, Lehman breaks even; if a subsequent earthquake does hit California, Lehman collects $10 million on the conventional California policy and pays $10 million on the double-whammy policy. Fair enough, but - what happens if the first relevant earthquake that year hits California?

As I read it, Lehman is underinsured - if an earthquake hits California, Lehman will then want an additional $1.6 million to top up its Japan policy from $2 million to $10 million. Where is that coming from?

As a first pass to the correct answer, let's extend Seo's strategy a bit - in addition to the $400,000 premium paid to buy $2 million of protection in Japan, let's double up and also buy enough California insurance to provide for a $2 million payout if a quake hits California; the intention is that the proceeds will be used to buy $10 million of coverage in Japan following a California quake.

That suggests a final answer double that presented here, but a further adjustment is necessary. If a first quake hits in Japan, the Japanese policy will provide enough to buy $10 million of coverage in California. But Lehman will have already bought $2 million of coverage in California, so there is a $2 million of excess coverage here. The right answer will have Lehman buying something less than $10 million in each market.

In fact, given the relative simplicity of this problem, since the payouts are 5 times the premium, Lehman ought to buy 1/6 the target coverage amount for both Japan and California, or roughly $1.67 million for each. Then, if a first earthquake hits at one site Lehman can buy 5 * $1.67 = $8.33 million for the other site, add it to the $1.67 million already held, and have a total of $10 million in insurance for the as-yet unhit site.

By that reckoning, the correct premium would be for coverage of $3.33 million, or $666,666 - a devilishly clever answer indeed.

Obviously, this strategy does not work if the independence of the events break down. For example, if insurers decide that Pacific rim earthquakes are geologically correlated, or that (based on the experience of the first quake) building codes have been inadequate throughout the region, an earthquake in Japan might increase pricing in California, or vice versa.

PUNS WE WOULD NEVER DARE, UNLESS, WELL... : Did I read this in the Times? Props to Mr. Lewis for sneaking it past the editor:

First, we get some of Mr. Seo's family history:

But when John [Seo] told [his mother] that he was leaving the university for Wall
Street, she wept. His father, a hard man to annoy, said, “The devil has
come to you as a prostitute and has asked you to lie down with her.”

Quite a colorful dad. In the next paragraph:

Tail risk, broadly speaking, is whatever financial cataclysm is
believed by markets to have a 1 percent chance or less of happening. In
the foreign-exchange market, the tail event might be the dollar falling
by one-third in a year; in the bond market, it might be interest rates
moving 3 percent in six months; in the stock market, it might be a 30
percent crash. “If there’s been a theme to John’s life,” says his
brother Nelson, “it’s pricing tail.”

Pricing what, and who is lying down with whom now? Geez, what kind of clown would slip that into a seemingly-serious endeavor?

August 25, 2007

One of George Bush's many legacies will be a dimunition of the notion that the military must respect their civilian oversight. Fred Kaplan notes this in a NY Times Magazine article about the clash within the Army between the "been there, tried to do that" young officers who have served in Iraq and Afghanistan and the generals who sent them there:

There is a specter haunting the debate over Yingling’s article [link] — the
specter of Gen. Douglas MacArthur. During World War II, Gen. Dwight D. Eisenhower threatened to resign if the civilian commanders didn’t order air support for the invasion of Normandy. President Franklin D. Roosevelt and Prime Minister Winston Churchill acceded. But during the Korean War, MacArthur — at the time, perhaps the most popular public figure in America — demanded that President Truman
let him attack China. Truman fired him. History has redeemed both
presidents’ decisions. But in terms of the issues that Yingling,
McMaster and others have raised, was there really a distinction?
Weren’t both generals speaking what they regarded as “truth to power”?

The
very discussion of these issues discomforts many senior officers
because they take very seriously the principle of civilian control.
They believe it is not their place to challenge the president or his
duly appointed secretary of defense, certainly not in public,
especially not in wartime. The ethical codes are ambiguous on how
firmly an officer can press an argument without crossing the line. So,
many generals prefer to keep a substantial distance from that line — to
keep the prospect of a constitutional crisis from even remotely arising.

On
a blog Yingling maintains at the Web site of Small Wars Journal [link], an
independent journal of military theory, he has acknowledged these
dilemmas, but he hasn’t disentangled them. For example, if generals do
speak up, and the president ignores their advice, what should they do
then — salute and follow orders, resign en masse or criticize the
president publicly? At this level of discussion, the junior and
midlevel officers feel uncomfortable, too.

Yingling’s concern is
more narrowly professional, but it should matter greatly to future
policy makers who want to consult their military advisers. The
challenge is how to ensure that generals possess the experience and
analytical prowess to formulate sound military advice and the “moral
courage,” as Yingling put it, to take responsibility for that advice
and for its resulting successes or failures. The worry is that too few
generals today possess either set of qualities — and that the
promotional system impedes the rise of officers who do.

This is not to say anyone is worried about a coup (sorry, anyone serious), but still.

A news analysis article on Thursday about President Bush’s speech
comparing the mission in Iraq to other wars described imprecisely the
timing of the American withdrawal from Vietnam. While President Johnson
in 1968 refused requests from commanders to increase the military
commitment in Vietnam by hundreds of thousands of troops, the reduction
in forces began in 1969, not 1968.

A picture caption with the
article also misstated the year by which almost all American combat
forces had left Vietnam. It was 1973, not 1975. (Go to Article)

Democratic leaders in Congress had planned to use August recess to raise the heat on Republicans to break with President Bush on the Iraq
war. Instead, Democrats have been forced to recalibrate their own
message in the face of recent positive signs on the security front,
increasingly focusing their criticisms on what those military gains
have not achieved: reconciliation among Iraq's diverse political
factions.

And now the Democrats, along with wavering Republicans,
will face an advertising blitz from Bush supporters determined to
remain on offense. A new pressure group, Freedom's Watch, will unveil a
month-long, $15 million television, radio and grass-roots campaign
today designed to shore up support for Bush's policies before the
commander of U.S. forces in Iraq, Army Gen. David H. Petraeus, lays out a White House
assessment of the war's progress. The first installment of Petraeus's
testimony is scheduled to be delivered before the House Armed Services
and Foreign Affairs committees on the sixth anniversary of the Sept.
11, 2001, terrorist attacks, a fact both the administration and
congressional Democrats say is simply a scheduling coincidence.

The
leading Democratic candidates for the White House have fallen into line
with the campaign to praise military progress while excoriating Iraqi
leaders for their unwillingness to reach political accommodations that
could end the sectarian warfare.

Blaming Maliki is safer than blaming Bush, although not as satisfying to the Dem base. The Guradian pegs him as a convenient scapegoat for both parties.

In Robert M. Gates, the defense secretary, Mike McConnell, the director
of national intelligence, and Gen. Michael V. Hayden, the director of
central intelligence, we have about as good a team as it is possible to
imagine. Most people in Congress know that. Why not assume they are
proposing a solution to a real problem? Developments in technology are
forcing a long-overdue statutory change — and those developments will
be with us long after the politics of the moment have passed.

I can picture the howls from the left, although the sedatives have not yet kicked in so I have not sallied forth to actually verify that picture. Any minute now!

But while we wait, does anyone care to bet against my prediction that I somewhere out there I will find a ten thousand word response with lots of words capitalized For Emphasis. Emphasis! This could be Easy Money!

Well. We applaud Mr. Bobbitt and nominate him for the Once Bitten Never Shy Hall of Fame.

HMMM: Waddya mean that Mr. Bobbitt "a professor of law and the director of the Center for National Security
at Columbia University [and] a National Security Council senior director
from 1998 to 1999" is the wrong Bobbit? The day is young, and they may yet share a special bond by the end of it. Metaphorically.

August 21, 2007

David Cay Johnston of the Times presents some "new government data" about the income distribution in America. However, he can't be troubled to provide a source for this data, and he seems to have made some dramatic errors in his presentation, possibly leading to an understatement of the point he is making. Here we go:

Americans earned a smaller
average income in 2005 than in 2000, the fifth consecutive year that
they had to make ends meet with less money than at the peak of the last
economic expansion, new government data shows.

While incomes have been on the rise since 2002, the average income
in 2005 was $55,238, still nearly 1 percent less than the $55,714 in
2000, after adjusting for inflation, analysis of new tax statistics
show.

The combined income of all Americans in 2005 was slightly larger
than it was in 2000, but because more people were dividing up the
national income pie, the average remained smaller. Total adjusted gross
income in 2005 was $7.43 trillion, up 3.1 percent from 2000 and 5.8
percent from 2004.

Since it was only last week that the Times editors demonstrated their unfamiliarity with the difference between medians and means, I am sure you are wondering with me - just what is meant here by "average" income?

The staid, unimaginative approach would be to dig up the study being cited here, and good luck with that - I assume it is out there, but I can't find it at the Census Bureau or the BLS.

However, I did find this at the Census Bureau - historical income results for both individuals and households, and there seems to be a problem.

In 2005 dollars, median individual income was $24,325 (the mean was $35,499). Neither of those figures is anywhere near the $55,238 reported by Johnston.

OK, so maybe he means household income - the Census report shows quintiles but this WH site says $46,326. The mean would be somewhat higher if the chart for individuals is a useful guide, so I suppose a household mean of $55,238 is possible.

But if Mr. Johnston is referring to household income, why does he write things like this:

The growth in total incomes was concentrated among those making more
than $1 million. The number of such taxpayers grew by more than 26
percent, to 303,817 in 2005, from 239,685 in 2000.

These individuals, who constitute less than a quarter of 1 percent
of all taxpayers, reaped almost 47 percent of the total income gains in
2005, compared with 2000.

"Individuals"? I doubt it. Unless he means "the individuals living in these households", which is a pretty lame rationalization, but maybe not so lame that the Times won't use it.

Pressing on we see this clue:

The group’s calculations showed that 28 percent of the investment tax
cut savings went to just 11,433 of the 134 million taxpayers, those who
made $10 million or more, saving them almost $1.9 million each. Over
all, this small number of wealthy Americans saved $21.7 billion in
taxes on their investment income as a result of the tax-cut law.

Hmm - from this site, we see 125 million individual returns in 2000, no doubt covering more than 125 million people, since many file jointly (I know I did.) From which I infer that when Mr. Johnston says "134 million taxpayers", he is talking about 134 million returns and a lot more than 134 million people.

Bah. I don't know why Mr. Johnston can't tell us where he got this report, I don't know why he can't be clear that he is referring to household income, I don't know why I can't find the report, and I can't comment on his numbers without more background. However - it may even be that Mr. Johnston is understating his populist position when he says that average real income fell by 1%. It appears from the household chart that, in 2005 dollars, the 40th percentile (second quintile threshold) fell from $37,408 to $36,000 while the 60th percentile fell from $59,143 to $57,660. Those are declines of 3.9% and 2.6%, for an average decline of 3.2%. The individual chart is less dramatic - the median moved from $24,390 to $24,325, a 0.3% fall.

Well. *IF* he is referring to mean income and not median income, and *IF* the two measures diverge, we may ask Brad DeLong to employ the lash again.

UPDATE: Here we go, thanks to Paul Zrimsek - it was at the IRS website. Mr. Johnston himself tells us it is available under the "Tax Stats" button from the home page and I am sure it is, but I still can't get there from here.

From the study, we are talking about 134 million tax returns, not individuals. And Mr. Johnston is emphatic that he understands medians and means, and is using means here. In which case, a darker story was available from the use of medians.

And here is a clue I overlooked from the original article:

Nearly half of Americans reported incomes of less than $30,000, and two-thirds make less than $50,000.

Clearly, if two thirds make less than $50,000, he must be reporting a mean income of $55K. That said, "half of Americans" ought to read "half of tax filers" - since filers will be a mix of individual and joint returns, I am not at all clear that this can be directly compared to either individual or household data from the Census.

And let's just plug Mr. Johnston's book as a reminder that he is hardly new to these issues. As he notes in his comment, the dead tree version does have space limitations and not every article can be written and targeted to the most anal-compulsive readers among us.

WE NOTE THE HEADLINE CHANGE: The original headline was "Average Incomes Fell for Most in 2000-5"; since Mr. Johnston would not be responsible for that, I did not belabor the absurdity, but apparently the Times has had second thoughts - the new headline is "2005 Incomes, on Average, Still Below 2000 Peak".

I DISPUTE THE AGENDA NOTION: Via Glenn, we see Mr. Johnston being taken to task for focusing on the 2000 income peak rather than the 2002 trough. Well, if he really had an agenda he would have focused on medians, as described above, for which the news is worse. His use of the average obscures a lot, although it is possible that the 2000 average was unduly inflated by the tech bubble.

WHAT I REALLY THINK: The problem with a study comparing cross-sections of the economy at two different times is illustrated by the absurd initial headline, which read "Average Incomes Fell for Most in 2000-5". Set aside the puzzle about whether "most" of us can earn the "average" income and reflect on this:

A group of people filed tax returns in 2000. Five years later, some of those people had died, retired and had no taxable income, or otherwise fled the tax reach of Uncle Sam. Let's say, hypothetically, that the typical person has fifty years as a taxpayer, so that in five years there would be ten percent turnover. In this guess, 90% of the Tax Year 2000 group is still filing in 2005. And in addition to those filers, a whole new group of high school and college grads as well as new arrivals to our verdant shores will be filing.

So - mathematically it is possible that every last manjack (and womanjack) in the 90 percent who filed in both 2000 and 2005 had a higher income in 2005. If the oldsters who retired and died made more than the newbies to the job market, the average income could still fall.

In which case, the headline would be what - people are dissatisfied even though 90% earn more than five years ago? Hey, that could even be true - maybe folks expected ten percent real wage boosts and only got five percent (on average); maybe new job entrants are disappointed by their current station in life relative to their expectations.

However, the IRS numbers are not helpful in gauging people's expectations, are they? Nor are they helpful in telling me what percentage of the 2000 group had a higher income in 2005.

I would have liked to see a study comparing actual filers in 2000 with the same people five years on, and the IRS is uniquely positioned to do that, since they have access to the individual returns. Then we could learn a bit about income mobility and see whether individuals are really progressing.

August 19, 2007

Alan Schwarz of the Times describes a new study which has detected racial bias in the calling of balls and strikes - apparently, when the umpire and the pitcher are the same race a (very) few calls favor the pitcher.

This study was inspired by a similar study on basketball officiating discussed here.

This caveat made me skeptical:

Hamermesh and his colleagues found that heightened scrutiny beyond
QuesTec also appeared to dampen the ball-strike variance. It
disappeared when the at-bat reached three balls or two strikes, a
particularly pivotal state. It also decreased as the stadium grew more
full, implying that the game was of larger significance.

The effect disappears in big spots or with big crowds? Weird - if it is an unconscious bias, why would the context make it go away? Or if it is a conscious bias, why so small?

August 18, 2007

WASHINGTON, Aug. 17 — The White House plans to use a report next month assessing progress in Iraq
to outline a plan for gradual troop reductions beginning next year that
would fall far short of the drawdown demanded by Congressional
opponents of the war, according to administration and military
officials.

One administration official made it clear that the goal of the
planned announcement was to counter public pressure for a more rapid
reduction and to try to win support for a plan that could keep American
involvement in Iraq on “a sustainable footing” at least through the end
of the Bush presidency.

The officials said the White House would portray its approach as a
new strategy for Iraq, a message aimed primarily at the growing numbers
of Congressional Republicans
who have criticized President Bush’s handling of the war. Many
Republicans have urged Mr. Bush to unveil a new strategy, and even to
propose a gradual reduction of American troops to the levels before
this year’s troop increase — about 130,000 — or even lower to head off
Democratic-led efforts to force the withdrawal of all combat forces by
early next year.

The officials spoke on condition of anonymity because of their
reluctance to discuss internal White House deliberations publicly.

Hmm. The worry about Congress calling for a complete withdrawal seems real but exaggerated. And just last week the Times assured us that the leading Presidential candidates were prepared for a long stay:

DES MOINES, Aug. 11 — Even as they call for an end to the war and
pledge to bring the troops home, the Democratic presidential candidates
are setting out positions that could leave the United States engaged in
Iraq for years.

John Edwards,
the former North Carolina senator, would keep troops in the region to
intervene in an Iraqi genocide and be prepared for military action if
violence spills into other countries. Senator Hillary Rodham Clinton of New York would leave residual forces to fight terrorism and to stabilize the Kurdish region in the north. And Senator Barack Obama
of Illinois would leave a military presence of as-yet unspecified size
in Iraq to provide security for American personnel, fight terrorism and
train Iraqis.

These positions and those of some rivals suggest that the Democratic
bumper-sticker message of a quick end to the conflict — however much it
appeals to primary voters — oversimplifies the problems likely to be
inherited by the next commander in chief. Antiwar advocates have raised
little challenge to such positions by Democrats.

I am pretty sure the leading Dems want Bush to declare defeat so they don't have to. And presumably Bush has a slower drawdown then they would prefer, but who knows?

August 16, 2007

USF economics prof Bruce Wydicki had a cogent piece in USA Yesterday relating the concept of sunk costs to America's involvement in Iraq. Although I do not dispute a word of his analysis I am delighted to pound the table in support of a related point not made by the prof. Here he goes:

Our inability to think clearly about sunk costs is impeding our
ability to make clear decisions about our involvement in Iraq. Failing
to correctly identify sunk costs (those that are irretrievable), and
deal with them properly, biases our decision-making in favor of
prolonging the war.

Maybe. Let's press on:

When I was a boy, my brother and I were captivated by a
pseudo-gambling machine called Silver Falls at an arcade where we spent
our summers in rural Missouri. The game works by directing a quarter
along a chute so that it lands on a sliding shelf filled with other
quarters. Aim correctly, and the falling quarter pushes a bunch of
other quarters off the shelf and into the jackpot hole.

The game is exceptionally addictive, a fact that was obviously not
lost on the arcade owners who installed the machine there. It seems
that just plunking one more quarter in the machine will supply the
necessary thrust to knock a huge pile of quarters off the shelf (some
of which by now are your own quarters). Quitting means a loss of all
the quarters that have been carefully invested in the game.

The inability to quit Silver Falls is related to a well-known idea
in economics about sunk costs. As every student of economics knows, one
should never take sunk costs into account when making a decision. They
are sunk, and there is nothing you can do about them.

Identify what we've lost

It is clear that some of those who argue for extending the war in
Iraq never learned about the importance of identifying sunk costs.
Consider the following type of statement, the likes of which we have
all heard many times: "A current withdrawal would dishonor the memory
of those who have made the ultimate sacrifice for the sake of liberty."
Whether one is for or against the war, is this a good way to think
about whether we should press on?

I will skip a bit out of a vague and uncharacteristic respect for copyright and cut to his conclusion:

In the rhetoric of the difficult decisions over whether to extend
our involvement in the war, including X as a cost of withdrawing
inappropriately inflates the cost of a withdrawal. Just as it is harder
to quit Silver Falls after wasting $10 worth of quarters, it is harder
to quit a war after incurring 3,600 dead and tens of thousands wounded, and spending the better part of a trillion dollars in a failed effort.

Although it may seem callous, we need to forget about X in our
decision-making about the war. The correct way to think about whether
or not to proceed is to weigh the costs and benefits from pressing on
from this point forward. What value do we place on victory? What are
the chances that we will prevail if we do press on? And what will be
the costs of pressing on in terms of lives and resources? Our country
may be divided on this issue, but we owe it to those who may yet be
called to make the ultimate sacrifice to properly count our costs.

To which I say, yes, but - is it only the war supporters that are befuddled about sunk costs vis a vis the importance of looking forward? Surely there are plenty of war opponents who argue, in effect, that Bush lied about WMDs, the war was launched without proper planning and international support, and therefore it is time to accept defeat and come home.

In the context of the Silver Falls metaphor, that would be akin to identifying the initial decision to commence dropping quarters into the game as a ghastly mistake that has now cost ten dollars, which will not be not coming back.

But suppose the next quarter has a fifty percent chance of shaking loose two dollars in change? That is an expected gross pay-off from the next quarter of one dollar, which implies that, however boneheaded the initial decision to commit ten dollars to the game, it really does behoove the player to continue a bit longer, even though the loss of ten dollars will not be fully redeemed.

That said, it would be well to carefully assess the objectivity and reliability of the person offering the evaluation of the next quarter drop - the fellow who has dropped the first forty might not be the most credible judge going forward.

August 12, 2007

The NY Times Week In Review front-pages an article so mathematically misdirected that it is laugh-out-loud funny for anyone with an understanding of basic statistics, a group which apparently includes no Times editors. Fortunately, the article includes mad sex pairings, a high school prom, and a mortified professor, so you know it is hot. Here we go:

The Myth, the Math, the Sex

EVERYONE knows men are promiscuous by nature. It’s part of the
genetic strategy that evolved to help men spread their genes far and
wide. The strategy is different for a woman, who has to go through so
much just to have a baby and then nurture it. She is genetically
programmed to want just one man who will stick with her and help raise
their children.

Surveys bear this out. In study after study
and in country after country, men report more, often many more, sexual
partners than women.

One survey, recently reported by the federal
government, concluded that men had a median of seven female sex
partners. Women had a median of four male sex partners. Another study,
by British researchers, stated that men had 12.7 heterosexual partners
in their lifetimes and women had 6.5.

So far, so good, but here comes the curve ball:

But there is just one problem, mathematicians say. It is logically
impossible for heterosexual men to have more partners on average than
heterosexual women. Those survey results cannot be correct.

It is about time for mathematicians to set the record straight, said David Gale, an emeritus professor of mathematics at the University of California, Berkeley.

“Surveys
and studies to the contrary notwithstanding, the conclusion that men
have substantially more sex partners than women is not and cannot be
true for purely logical reasons,” Dr. Gale said.

Oh My Goodness - is this professor emeritus really unfamiliar with the difference between "mean" and "median"? I assume not, and yet... the Times lead clearly referred to partners of the "median" man and woman.

Well, let's see his reasoning:

He even provided a proof, writing in an e-mail message:

“By
way of dramatization, we change the context slightly and will prove
what will be called the High School Prom Theorem. We suppose that on
the day after the prom, each girl is asked to give the number of boys
she danced with. These numbers are then added up giving a number G. The
same information is then obtained from the boys, giving a number B.

Theorem: G=B

Proof: Both G and B are equal to C, the number of couples who danced together at the prom. Q.E.D.”

For heaven's sake - I will grant that *if* the reporting by men and women is accurate then the means must be equal. However, one reason for using medians rather than means is to mute the behavior of the, hmm, possibly misbehaving tails. Of the distribution. Since this is apparently not obvious to Times editors, let me illustrate by returning to the prom.

Suppose 100 young men and woman attend the prom. Ninety of the young ladies choose to dance only with their dates; ten dancing femmes set out to dance with every guy in attendance, and succeed (Guys are soooo easy. Who knew?).

So how does the reporting go at the end of the evening? Ninety young men report eleven dance partners - the ten Dancing Femmes plus their date. Ten guys have a mere ten partners, since their original date was one of the Dancing Femmes. From the guys we get total partners equal to (90*11 + 10*10), which equals 1,090 partners. *Averaged* over the one hundred guys, that is 10.9 partners per guy, with a *median* number of partners equal to eleven.

And how about the ladies? Ninety of them report just one partner, their date. Ten of them report one hundred partners. Total partners from the ladies' ledger is (90*1 + 10*100), which also equals 1,090. That produces a mean of 10.9 partners per lady, but the median number of partners is only 1.

The median is different from the mean because the median effectively ignored the behavior of the small group of mad dancers. How about that? Or should I say, Q.E.D?

Groan. I have no doubt that mocking emails are piling up in David Gale's inbox; I further have no doubt that Prof. Gale is wishing he had been a bit more clear on what the Federal study was saying about medians and what he was saying about means. As to whether the reporter inadvertently misrepresented the study to him (Mean, median, hey, I'm on deadline!), or Gale misunderstood the question, who knows? But clearly neither the Times reporter nor her editors understood what they were presenting.

But let me just add this - Gale blew it, and the ends did not justify the means.

For those who care, the article overcomes this ghastly start to make some plausible points about cultural pre-dispositions to misreporting by both sexes.

The summer of fear begins yet again - if if is August, a Red Sox lead must be melting like an ice cream cone held by a distracted six year old (while riding on the fine Corinthian leather seats of your new car, but that is a different story...).

Let's see - 21 year old Yankee rookie Phil Hughes looks like the next300 game winner, and 21 year old Joba Chamberlain looks like the next K-Rod, or Papelbon, or Jenks, as the Yankees thump Cleveland 6-1.

And speaking of Papelbon, did we notice a meltdown by the much-heralded Sox bullpen, as Gagne and Okajima fail to hold a 5-1 lead? My, my.

The Yanks are now tied with Seattle in the wild card race and are a mere five games back of the Sox. And I noticed an odd thing a few days back - I often listen to sports talk radio as I drive around the New York area, and although a few Mets fans are heard from the talk is dominated by the Yankees, which is as it should be.

However! I was in Boston recently, and the talk there was also dominated by the Yankees. I sensed their fear.

August 09, 2007

Anthony Cordesman of the Center for Strategic and International Studies was on the trip to Iraq that was described so famously by Messrs. O'Hanlon and Pollack. His report is here (25 page .pdf), but here is a snippet:

There are other reasons for patience. While all the half truths and spin of the past have built up a valid distrust of virtually anything the Administration says about Iraq, real military progress is taking place and the US team in Baghdad is actively seeking matching political and economic progress.

Declassified intelligence data generated by MNF-West confirms in far more detail what a walk on the ground reveals in both Anbar and Northern Iraq. Substantial numbers of tribal leaders have turned against Al Qa’ida for its repressive efforts to enforce its view of Islamic custom, forced marriages, kidnappings and extortions, and killings of local and tribal leaders. Key tribal leaders, and the main tribal confederation in the area have started to fight Al Qa’ida, have turned to US forces for help, and seem willing to strike a bargain with the Shi’ite-dominated central government if the government will give them money, a reasonable degree of de facto Sunni autonomy, and incorporate their fighters into auxiliary police forces, the regular police, and Iraqi Army. Sunnis in other areas are considering similar deals, although such Sunni support of the US and central government is uncertain and dependent on far more action from the central government than has occurred to date.

Or, from his summary:

From my perspective, the US now has only
uncertain, high risk options in Iraq. It cannot dictate Iraq’s future,
only influence it, and this presents serious problems at a time when
the Iraqi political process has failed to move forward in reaching
either a new consensus or some form of peaceful coexistence. It is
Iraqis that will shape Iraq's ability or inability to rise above its
current sectarian and ethnic conflicts, to redefine Iraq's politics and
methods of governance, establish some level of stability and security,
and move towards a path of economic recovery and development. So far,
Iraq’s national government has failed to act at the rate necessary to
move the country forward or give American military action political
meaning.

The
attached trip report does, however, show there is still a tenuous case
for strategic patience in Iraq, and for timing reductions in US forces
and aid to Iraqi progress rather than arbitrary dates and uncertain
benchmarks. It recognizes that strategic patience is a high risk
strategy, but it also describes positive trends in the fighting, and
hints of future political progress.

Per the NY Post, Times Select is about to be canned; terms of the work-release for inmates such as Maureen Dowd and Frank Rich are still under discussion. Key factoid:

In July, The Post reported that insiders were lobbying to shut down
the service. After two years, however, the move to do away with
TimesSelect may have more to do with growth than grumbling inside the
paper.

The number of Web-only subscribers who pay $7.95 a
month or $49.95 a year fell to just over 221,000 in June, down from
more than 224,000 in April.

August 06, 2007

Yet another poll, this time from USA Today, supports the surprise result from last week's NY Times / CBS News poll - public support for the surge in Iraq is rising:

In the latest USA TODAY/Gallup Poll, taken Friday through Sunday,
the proportion of those who said the additional troops are "making the
situation better" rose to 31% from 22% a month ago. Those who said it
was "not making much difference" dropped to 41% from 51%.

About the same number said it was making things worse: 24% now, 25% a month ago.

The Times had asked whether we did the right thing in initially invading Iraq and was surprised by an uptick among "Yes" responses.

Mike Isikoff reports that the investigation into the leak of the NSA surveillance program is apparently ongoing:

Aug. 13, 2007 issue - The controversy over President Bush's warrantless
surveillance program took another surprise turn last week when a team
of FBI agents, armed with a classified search warrant, raided the
suburban Washington home of a former Justice Department lawyer. The
lawyer, Thomas M. Tamm, previously worked in Justice's Office of
Intelligence Policy and Review (OIPR)—the supersecret unit that
oversees surveillance of terrorist and espionage targets. The agents
seized Tamm's desktop computer, two of his children's laptops and a
cache of personal files. Tamm and his lawyer, Paul Kemp, declined any
comment. So did the FBI. But two legal sources who asked not to be
identified talking about an ongoing case told NEWSWEEK the raid was
related to a Justice criminal probe into who leaked details of the
warrantless eavesdropping program to the news media. The raid appears
to be the first significant development in the probe since The New York
Times reported in December 2005 that Bush had authorized the National
Security Agency to eavesdrop on the international phone calls and
e-mails of U.S. residents without court warrants.

FWIW, per the FEC database Mr. Tamm gave $300 to the DNC in Sept 2004. That's not much - who remembers Mary McCarthy, a sacked leaker who, with her hubby, gave $9,000 to Dems? - but let's keep it in mind.

Was Nancy Pelosi really that concerned that Bush would rally the full force of the 29% who still approve of the job he is doing? Maybe!

But I'll bet she was worried that Rush Limbaugh and the right wing talk machine would have chewed on Democrats about this issue all through the August recess - immigration is over, so what were they going to rant about?

Shouldn't she also have been worried about being chewed on by the "netroots" if she cravenly gave in to Bush? Evidently, she was more worried about Rush - go figure.

THE DEMOCRATIC-led Congress, more concerned with protecting its
political backside than with safeguarding the privacy of American
citizens, left town early yesterday after caving in to administration
demands that it allow warrantless surveillance of the phone calls and
e-mails of American citizens, with scant judicial supervision and no
reporting to Congress about how many communications are being
intercepted. To call this legislation ill-considered is to give it too
much credit: It was scarcely considered at all.

James Risen of the Times (who broke the original story) tells us that this bill is a broader expansion of power than advertised:

WASHINGTON, Aug. 5 — President Bush signed into law on Sunday
legislation that broadly expanded the government’s authority to
eavesdrop on the international telephone calls and e-mail messages of
American citizens without warrants.

Congressional aides and others familiar with the details of the law
said that its impact went far beyond the small fixes that
administration officials had said were needed to gather information
about foreign terrorists. They said seemingly subtle changes in
legislative language would sharply alter the legal limits on the
government’s ability to monitor millions of phone calls and e-mail
messages going in and out of the United States.

They also said that the new law for the first time provided a legal
framework for much of the surveillance without warrants that was being
conducted in secret by the National Security Agency
and outside the Foreign Intelligence Surveillance Act, the 1978 law
that is supposed to regulate the way the government can listen to the
private communications of American citizens.

“This more or less legalizes the N.S.A. program,” said Kate Martin,
director of the Center for National Security Studies in Washington, who
has studied the new legislation.

The NY Times glows with A Rod's 500th but omits this statistical oddity - A Rod had 345 home runs when he came to the Yankees and has added 155 here. He has hit 344 while playing shortstop for Seattle and Texas, 2 as a DH, and 154 as a third baseman for the Yankees.

However! The career leader for home runs by a shortstop is Cal Ripken with 345, so A Rod is one short at that position.

And the career leader at third is Mike Schmidt with 509, a total A Rod is unlikely to surpass as a third baseman.

Consequently, if A Rod plays out his career at the right hand of Derek Jeter he may end up as the career leader in home runs without being a career leader at either position. Of course, A Rod may go free agent and end up as a shortstop for the Angels next year, but I am not even going to give that ghastly prospect a nano-second of thought. ESPN had an interesting article telling us that A Rod has roughly a fifty-fifty chance of one day surpassing Bonds.

WASHINGTON, Aug. 4 — Under
pressure from President Bush, the House gave final approval Saturday to
changes in a terrorism surveillance program, despite serious objections
from many Democrats about the scope of the executive branch’s new
eavesdropping power.

Racing to complete a final rush of legislation before a scheduled
monthlong break, the House voted 227 to 183 to endorse a measure the
Bush administration said was needed to keep pace with communications
technology in the effort to track terrorists overseas.

“The intelligence community is hampered in gathering essential information about terrorists,” said Representative Lamar Smith, Republican of Texas.

The House Democratic leadership had severe reservations about the
proposal and an overwhelming majority of Democrats opposed it. Speaker Nancy Pelosi said the measure “does violence to the Constitution of the United States.”

But with the Senate already in recess, Democrats confronted the
choice of allowing the administration’s bill to reach the floor and be
approved mainly by Republicans or letting it die.

If it had stalled, that would have left Democratic lawmakers, long
anxious about appearing weak on national security issues, facing an
August spent fending off charges from Republicans that they had left
Americans exposed to threats.

Despite the political risks, many Democrats argued they should stand
firm against the initiative, saying it granted the administration far
too much latitude to initiate surveillance without judicial review.

They said the White House was using the specter of terrorism to
weaken Americans’ privacy rights and give more power to Attorney
General Alberto R. Gonzales, an official Democrats say has proved himself untrustworthy.

“Legislation should not be passed in response to fear-mongering,” said Representative Rush D. Holt, Democrat of New Jersey.

Ohhh, pauvre petites... My goodness, if the bill is that bad, don't pass it and deal with the consequences. Ooops, that would almost look as if the House leadership had the courage of their convictions; my bad.

I love this wrinkle to the political calendar:

Senior House Democratic leaders said they were resigned to the
measure, which will be in force for six months. But they said they
would not wait that long before trying to come up with a more
acceptable, permanent change in the Foreign Intelligence Surveillance
Act.

“There is no way we are ever going to wait six months,” said
Representative Rahm Emanuel of Illinois, chairman of the House
Democratic Caucus.

Six months from now is early February 2008. The Iowa caucuses seem to be set for January 2008 - do we suppose Hillary and Barack want to be voguing for votes by having to deal with this issue just as the primary season commences? I'll bet Rahm Emanuel will be delighted to help by getting that done just before the Christmas recess when nobody is looking.

But perhaps some sinister Republicans will derail his plans and force the leading Dems to flash their national security credentials under the bright lights of the primaries. And perhaps John Edwards, if he has supporters in the Senate, will find Dems to help delay the vote until January 2008 - after all, he is out of the Senate after six arduous (but educational!) years so he has nothing to lose by criticizing the votes of others.

The LA Times and WaPo have background on the FISA Court ruling that may have been the spur to this legislation. From the WaPo:

A federal intelligence court judge earlier this year secretly declared
a key element of the Bush administration's wiretapping efforts illegal,
according to a lawmaker and government sources, providing a previously
unstated rationale for fevered efforts by congressional lawmakers this
week to expand the president's spying powers.

...The judge, whose name could not be learned, concluded early this year
that the government had overstepped its authority in attempting to
broadly surveil communications between two locations overseas that are
passed through routing stations in the United States, according to two
other government sources familiar with the decision.

August 03, 2007

I question this compliant reporting and academically dubious self-characterization from the YKos Convention:

Kos: 'I didn't fit in' in Illinois

Steve Johnson

Tribune Internet critic

So
Markos Moulitsas -- the legendary blogger "Kos" in the Daily Kos --
doesn't much like Illinois and Chicago, despite, or maybe because of,
spending most of his teen years here.

"Too hot, too cold, too flat," he said, speaking after a news
conference at the second annual YearlyKos gathering, going on through
Sunday at McCormick Place South.

And too hard to fit in, says the current Berkeley, Calif., resident,
for a "nerd" who was born in Chicago but raised in El Salvador until
age 9.

Moulitsas, 35, whose father was Greek and mother Salvadoran, attended
Schaumburg High School. "I didn't speak English very well. ... So it
was easy for me to be bullied and picked on, and I didn't fit in."

As diligent readers of the NY Times learned just last weekend, "nerds" are hyper-white with stunning elocution; how a kid of mixed Greek/Salvadoran descent with poor English skills could possibly be mistaken for a nerd is utterly mysterious.

Well - we would look for a clarification in subsequent reporting but apparently the YKos has been subjected to early termination. Pretty disappointing news for lovers of the Constitution, or even for those looking forward to this year's tin-foil hat competition.

Valerie Wilson may be the best known former intelligence operative in recent history,
but a federal judge in New York ruled Wednesday that she was not
allowed to say how long she worked for the Central Intelligence Agency in the memoir she plans to publish this fall.

Although the fact that Ms. Wilson worked for the C.I.A. from 1985 to
2006 has been published in the Congressional Record and elsewhere, the
judge, Barbara S. Jones of Federal District Court in Manhattan, said
Ms. Wilson was not free to say so.

“The information at issue was properly classified, was never
declassified and has not been officially acknowledged by the C.I.A.,”
Judge Jones wrote.

C.I.A. employees sign agreements requiring them to submit
manuscripts to the agency for permission before they are published. The
C.I.A. has publicly acknowledged only that Ms. Wilson worked there from
2002 to January 2006, when she resigned.

But a February 2006 letter from the C.I.A. to Ms. Wilson about her
retirement benefits said that she had worked for the agency since Nov.
9, 1985, for a total of “20 years, 7 days,” including “six years, one
month and 29 days of overseas service.” The letter was published in the
Congressional Record in connection with proposed legislation concerning
Ms. Wilson’s benefits, and it remains available on the Library of Congress’s Web site.

Judge Jones acknowledged that the C.I.A. “does not contest that the
information is, in fact, in the public domain,” adding that “the public
may draw whatever conclusions it might from the fact that the
information at issue was sent on C.I.A. letterhead by the chief of
retirement and insurance services.”

But she said a classified court filing from Stephen R. Kappes, the
deputy director of the C.I.A., which lawyers for Ms. Wilson and her
publisher were not allowed to see, contained a reasonable explanation
for the agency’s position. Judge Jones did not reveal it, saying only
that Mr. Kappes has persuaded her of “the harm to national security
which reasonably could be expected if the C.I.A. were to acknowledge
the veracity of the information at issue.”

“His explanation is reasonable,” Judge Jones wrote of Mr. Kappes’s
secret statement, “and the court sees no reason to disturb his
judgment.”

I would love to see that explanation - perhaps Ms. Plame was on double-secret probation for part of her employment. But let's press on:

Mr. Rothberg said that aspect of Judge Jones’s ruling was particularly frustrating.

“Trying to argue a case in which the government was able to submit
a supersecret affidavit which we were not able to review was like
playing an opponent who has 53 cards in his deck,” he said.

Ahh - here is where I need some help. I am looking for a rejoinder along the lines of "Yes, but trying to argue about the significance of Joe Wilson's Niger trip with one of his supporters is like playing an opponent with only 51 cards in their deck." Only funny.

Or maybe, "Trying to argue about Ms. Plame's covert status with a special counsel who is sitting on her personnel file is like...". Well, you see my conundrum.

We had previously noted this CIA letter, and continue to believe the information that her pension calculation includes an official CIA accounting of her service abroad is a key data point eerily but not inexplicably suppressed by Special Counsel Fitzgerald.

August 01, 2007

I am stunned by the latest about Barack Obama, from Nedra Pickler of the AP:

WASHINGTON - Democratic presidential candidate Barack Obama said Wednesday that he would possibly send troops into Pakistan to hunt down terrorists, an attempt to show strength when his chief rival has described his foreign policy skills as naive.

The Illinois senator warned Pakistani President Gen. Pervez Musharraf
that he must do more to shut down terrorist operations in his country
and evict foreign fighters under an Obama presidency, or Pakistan will
risk a U.S. troop invasion and losing hundreds of millions of dollars
in U.S. military aid.

"Let me make this clear," Obama said in a speech prepared for
delivery at the Woodrow Wilson International Center for Scholars.
"There are terrorists holed up in those mountains who murdered 3,000
Americans. They are plotting to strike again. It was a terrible mistake
to fail to act when we had a chance to take out an al-Qaida
leadership meeting in 2005. If we have actionable intelligence about
high-value terrorist targets and President Musharraf won't act, we
will."

The excerpts were provided by the Obama campaign in advance of the speech.

Hmm, the "Let me make this clear" bit makes it hard to believe this is an out-of-context misquote.

Well. As has been mooted for years, Musharraf has the strength of weakness - if we push him too hard he might, he might be replaced and nuclear Pakistan might be run by someone much worse.

I really don't know what Obama is thinking here. The offered explanation - "an attempt to show strength when his chief rival has described his foreign policy skills as naive" - is troubling, yet strangely plausible; for more on the "See How They Run" Dems voguing for profiles in courage, turn to the Anon Lib pondering the Dems haste to amend FISA to Bush's liking.

I'll guess this keeps the Gore flame flickering - I understand he is happy doing his current thing, but someone will sit down and engage in a frank and rank appeal to his ego, insisting that this is not about Al but about saving the planet - Obama is dangerously inexperienced, Hillary is unelectable, but Al can stave off Evil Rudy (or Evil Fred) and save the planet.

As to the policy itself - I have no doubt that when Rumsfeld's decision to cancel the "invasion of Pakistan" was reported in the Times a few weeks back the reflexive Bush-bashers bashed this (some flavor at Memeorandum). However... even if one thinks that we should have risked the collapse of the Musharraf government over this raid, I can't imagine that people further believe we should have announced out intentions in advance, as Obama is doing here - couldn't we at least preserve some implausible deniability, or wait until we have a few high-value captives to parade before we admit to violating the Pakistani border?

My other thought is that Obama is carrying a particular Dem notion to a logical extreme. Bush has said for years that the War on Terror is not simply about Osama bin Laden. In opposition, some Dems (I am thinking of Kerry's 2004 run) decided to make Bush's failure to catch Osama at Tora Bora a centerpiece of their campaign. Which has now brought us here.

I will be very curious to see how Hillary and Richardson react to this.